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PictureTel: Phoenix from the fire?

PictureTel: Phoenix from the fire?

ARN: PictureTel has suffered at the hands of a tough market in the past couple of years. Where is the company at now?

Jaffe: We're in a rebuilding phase of the organisation. The company has experienced significant losses over the last couple of years, and we are now in a turn-around phase. And in addition to that, we're working very hard on changing the corporate culture to once again be very customer focused.

What is PictureTel's target market these days?

Well, there's two ways of looking at that. Clearly this [iPower] platform is so powerful you have vertical markets that we fit naturally with, such as education and tele-medicine. But, in general, our target market is any company that has issues with distance and time. The other interesting thing about the PictureTel 900 series is that we treat data with equal importance as the video signal. Therefore, anything you produce in the electronic format we can send in a data native format. I can open up a spreadsheet, click on a button and allow you to take control, so you on your end can work on my spreadsheet. We're working together and it doesn't matter that you're 5000 miles away from me.

You've spent some 20 years in the Boston business community and have a reputation for rebuilding and reinvigorating businesses and under-performing companies. What prompted you to join PictureTel?

In my role as manager of the corporate restructuring practice for Arthur Andersen, PictureTel was my client, and I've been using PictureTel systems for over a decade in the companies I've run and participated in so I knew the technology. Basically my team at Arthur Anderson had been asked to create the turn-around plan and the management and the board of directors at PictureTel asked if I would come in and run the company and execute against the plan we had developed. I truly believe there were a number of really talented people at PictureTel. I believe the technology is remarkable and there's a place for it and a value to it. I knew we could raise the money to put the liquidity issues behind us so when I looked at the entire package I knew it would be fun and we would win. And that's the critical thing.

What challenges then does PictureTel face to become the dominant player again?

Videoconferencing historically hasn't been an exciting experience because it never really delivered on the Hollywood promise. It was just talking heads and often it was like a bad Godzilla movie where the lips did not match the sound and it was not television quality. Now we've taken it to the next level. It's TV quality - the lips match the sound, there is no more delay so you can talk much more naturally. It's full duplex and that's just the videoconferencing side. The biggest challenge is to get people to see that paradigm shift and move towards it. There is also the challenge of time because we clearly want this to happen in Internet speed. But the beauty is that business now moves at that speed, so while it's a challenge, it's a challenge we can conceive.

But what about the bandwidth issues in Australia?

If we had introduced the technology two years ago there would have not been enough bandwidth to handle it. While Australia does not have pipes as big as other parts of the world there's still a very robust digital phone network and we can work over digital phone lines or IP protocol. So our system has both native to it, therefore you can configure your environment to whatever works best at your location. So Australia, while it doesn't have the biggest pipes, absolutely has enough to have a robust experience using our equipment.

PictureTel is reporting that its 900 Series is already 37 per cent above target in Australia. What do you attribute this to?

A couple of reasons. The first is we have a great team in Australia pushing the product. Secondly, we launched the product with a wonderful program called the iPower Tour. Thirdly, I really think you guys have the unique luxury of being in the world spotlight because of the Olympics etc. There's such a buzz around communication and global communication and we have a tool that facilitates all that. Sometimes it's good to be good, but it's timing takes you over the top and I think we are the right product at the right time.

What's the strategy looking forward in Australia? Are you likely to up the number of PictureTel resellers here?

It's not so much adding more channel partners. It's making sure the channel partners we possess have a great value proposition and something to sell. A lot of our channel partners understand the whole concept of an integrated solution. So what they're doing is taking our products - and we want to be at the centre of the room - and building good systems, and robust systems, to allow for additional productivity.

With its personal history of growth through acquisition, are we likely to see PictureTel on a buying spree in the future?

I don't necessarily think you'll see acquisitions per se - definitely not in the videoconferencing arena. You may see it in the productivity tool arena, but we are the technology leaders in video conferencing. So to go out and buy someone else's technology while we are in the position of being next-generation is probably not a direction we'd go. However, once again PictureTel will be known as a company that increases productivity, so between strategic partnerships and potential acquisitions to enhance productivity is the way we'll grow the business.

What's the videoconferencing market like at the moment?

We see a market place where currently you have under 4 per cent of conference rooms video-enabled. Well, the world is changing. Three years ago nobody had streaming and now you see such an implementation of it and that's our first cousin. So as people get more used to having video as part of their daily lives in a work environment, that will help drive the use of one-to-many - meaning streaming - but to full interactive which is us. So we'll see far more videoconference rooms enabled, and then you'll see more and more desktops [enabled], and again the bandwidth world is changing while there are still bandwidth limitations today. If you look out three to four years, you'll see that as far less of an issue. Videoconferencing is not a killer application the way CAD (computer aided design) CAM, or spreadsheet, or presentation software is. What we are is enabling technology. We enable people to use those killer applications regardless of where they are.


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